Rumours and speculation – many telecommunications experts have been predicting consolidation in the South African telecommunications market, and if industry speculation is to be believed, numerous acquisition talks are currently happening.
Cell C CEO Alan Knott-Craig previously said that consolidation in the South African telecommunications market was inevitable.
According to Knott-Craig, smaller players can simply not compete against Vodacom and MTN without scale, and consolidation is the logical way to achieve a more competitive position.
This consolidation fever, as one industry player described it, may be similar to the period in 2008 when MTN acquired Verizon Business SA, Telkom acquired MWEB Africa, and MWEB was for sale to the highest bidder.
Vodacom, MTN looking to buy Neotel
Industry rumours suggest that Vodacom and MTN are in separate talks with Neotel to potentially acquire the company.
Neotel will be a valuable asset to a mobile operator, partly because of the spectrum it owns and its established fibre network.
Neotel’s major shareholder Tata Communications has denied speculation that it is planning to sell its stake in the company, but industry sources are adamant negotiations are progressing well.
Telkom and Cell C
Another company linked to consolidation discussions is Cell C.
If the price is right it will make sense for Telkom to acquire Cell C to bolster its mobile market share and inherit Cell C’s established cellular network.
Service provider consolidation
Industry players have also highlighted that large service providers such as Vox Telecom and iBurst may become attractive acquisition targets.
Vox Telecom and iBurst’s strong presence in the SME market can help Vodacom, MTN, and Neotel to boost their presence in this market segment.
iBurst also has valuable 1,800MHz spectrum which can solve MTN or Vodacom’s LTE spectrum headaches.
MWEB (and MWEB Business) has also been named as a potential acquisition target, but after Naspers’ unsuccessful 2008 bid to sell the company it may be hesitant to invest time in such a venture again.
Internet Solutions’ big plans
It is further speculated that Internet Solutions keen to become a true telecoms operator with its own network.
The company, with its parent Dimension Data, were rumoured to be in discussions with Neotel about a potential acquisition, but these discussions have apparently been stopped.
Telkom a great buy, if government was not involved
The most attractive acquisition target may not be Neotel, Cell C or even a corporate ISP such as Internet Solutions and Vox Telecom. It may be Telkom.
If a company can buy Telkom for anything close to its current market cap of under R7-billion it will be the bargain of the century. However, this will be nothing short of a miracle.
Government, which directly owns 39.8% of Telkom and another 10.5% through the Public Investment Corporation (PIC), is unlikely to approve any acquisition deal.
Even if Government was willing to sell its stake in Telkom, very few companies will be keen to take on the massive workforce and political challenges associated with the operator.
As one industry player described the situation, “a deal with Telkom is not a business discussion, it is a political negotiation”.
Some people suggested that the best solution may be for Government to buy Telkom (hence all the shares which it does not already own), unbundle and sell the retail side of the business, and merge the rest with Sentech to create a true wholesale telecoms operator for SA.